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International Monetary Fund (IMF) has said that India remains the bright spot and maintains the growth proejection at 6.1 per cent for Fiscal Year 2023-24 (FY24). It further expects India’s growth to go up to 6.8 per cent in the Fiscal Year 2024-25 (FY25)
Meanwhile, according to latest update released on Tuesday, it has revised the global outlook by 20 basis points for the year 2023 to 2.9 per cent.
It expects India to grow at 6.8 per cent during current fiscal (FY23). In its October edition of WEO, it had estimated GDP growth at 6.1 per cent for FY24. Now in its latest outlook, IMF said: ”Growth in India is set to decline from 6.8 per cent in 2022 (FY23) to 6.1 per cent in 2023 (FY24) before picking up to 6.8 percent in 2024 (FY25), with resilient domestic demand despite external headwinds.” Further, it explained that India‘s growth projections are 5.4 per cent in 2023 and 6.8 per cent in 2024 based on calendar year.
IMF growth projection for FY23 is lower than 7 per cent as estimated by the Statistic Ministry. However, it is at par with 6.8 per cent of RBI and higher than 6.5 per cent of World Bank.
Global Economy
The update said that global growth is projected to fall from an estimated 3.4 per cent in 2022 to 2.9 per cent in 2023, then rise to 3.1 per cent in 2024. The forecast for 2023 is 0.2 percentage point higher than predicted in the October WEO, but below the historical (2000–19) average of 3.8 per cent. The rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity. The rapid spread of Covid-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery.
The update said that the forecast of low growth in 2023 reflects the rise in central bank rates to fight inflation –especially in advanced economies– as well as the war in Ukraine. The decline in growth in 2023 from 2022 is driven by advanced economies; in emerging market and developing economies, growth is estimated to have bottomed out in 2022.
“The expected pickup in 2024 in both groups of economies reflects gradual recovery from the effects of the war in Ukraine and subsiding inflation. Following the path of global demand, world trade growth is expected to decline in 2023 to 2.4 per cent, despite an easing of supply bottlenecks, before rising to 3.4 per cent in 2024,” it said.
Further, the update said that the balance of risks remains tilted to the downside, but adverse risks have moderated since the October 2022 WEO. On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation is plausible. On the downside, severe health outcomes in China could hold back the recovery, “Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress. Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress,” it said.
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